Smarter deductibles?

Written By: Jason Shafrin
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Feb•
12•17

Are high deductible health plans a good thing? Republicans typically argue yes as they say that increased cost sharing reduces moral hazard. That is, when people have to pay for medical care out of pocket, they don’t ask for unnecessary care or use care more frugally. Democrats typically argue that increased cost sharing reduces demand for effective health care, decreases medication adherence, and may even increase long-term cost if foregoing effective care results in higher downstream medical cost.

There is evidence for both arguments. The RAND Health Insurance Experiment showed that people consume less health care when they have higher out-of-pocket cost. A recent study by Wharam et al. (2017) found that low-income patients with high-deductible health plans did not use necessary health care and this resulted in a higher number of emergency department visits.

A commentary by Fendrick and Chernew (2017) argues for a “Precision Benefit Design”. They propose a value-based insurance design (V-BID) which would lower cost-sharing for high-value services and increase cost-sharing for low-value services. They state that “In a nuanced design, cost sharing for eye examinations would be substantially lower for those with diabetes than for those without.” The authors argue for pre-deductible coverage of high value services even for patients who have HDHP. In fact, law has already been passed to facilitate this type of plan.

To better enable the synergies between value-based payment models and benefit designs, in July 2016, the bipartisan H.R. 5652 “Access to Better Care Act of 2016 ”was introduced. This bill givesHSA-qualified high-deductible health plans the ability to provide coverage for services that manage chronic disease prior to meeting the plan deductible.

While V-BID are good in theory, there are some issues in practice. First, it is more complicated and expensive for plans to administer as deductibles will vary within a plan type depending on a person’s condition. Second, it will be more difficult for patients to price compare across plans if deductibles and copayments routinely change each year depending on their health condition. Third, V-BID will likely result in more paperwork and appeals regarding what constitutes high value care and who (and when) people are eligible for a cost sharing waiver.

Despite these challenges, reducing cost sharing for high-value treatments is an appealing approach. The question to be answered will be whether these logistical challenges can be overcome.